News

QuantumScape (NYSE: QS) and Volkswagen today announced a new deal that has the electric vehicle (EV) battery start-up's stock soaring.

The news pushed QuantumScape shares higher by as much as 34% Thursday morning. As of 11:05 a.m. ET, the stock was still trading up by 29.2%.

A potential EV battery game changer

The two companies aren't strangers. Volkswagen was an early investor in QuantumScape hoping that it can successfully commercialize the solid-state battery technology it is developing. QuantumScape's battery technology could address range anxiety and reinvigorate interest in EVs after a slowdown in sales growth.

Today, the partnership between the two companies expanded. The new agreement gives Volkswagen's battery company, PowerCo, the right to license and mass produce QuantumScape's pioneering technology.

QuantumScape will receive royalty payments contingent upon successful progress of its battery technology. The license will then allow PowerCo to potentially produce enough batteries to equip about 1 million EVs annually.

The battery maker has been progressing on its path to commercialize a proprietary technology utilizing a solid-state ceramic separator to improve EV battery performance and safety. It has shown improvements in power density and safety that results in faster charging and vehicle range potential.

Those have proven to be constraints in EV sales growth now that the industry is beyond the early adopter stage. The collaboration could accelerate the manufacture and adoption of the technology once a successful qualification process is completed.

Investors who want to profit from that potential success are jumping into QuantumScape stock today. However, any hiccups in the qualification process will likely tank the stock, so it would be wise to allocate any investment accordingly.

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Howard Smith has positions in QuantumScape. The Motley Fool has positions in and recommends Volkswagen Ag. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.